Income and purchasing power
Earned capital is a figure measured and published annually by most countries. It is the gross domestic product, the sum of all domestically generated income. If you convert this income to the number of inhabitants, you get a value that is hardly comparable. This is because income is not measurable over different countries if the money cannot be used to buy the same things.
An income can, therefore, only be compared if the respective countries' price structure is considered. A rented apartment for $500 per month may be standard in many countries, but in a poor developing country, you can purchase half a palace for the same money but buy a sparse little room, at best, in a rich country like Singapore. If we now adjust incomes for purchasing power, we obtain an internationally comparable fictitious currency: the PPP dollar, which stands for Purchasing Power Parity.
The calculations in this table are based on data from 2022. Evaluations for 2023 are expected as usual next spring when the economic data have been collected and published.
Wealth in small countries
It is unsurprising that so many small countries are in the top ranks. The top 20 richest countries include 14 countries with fewer than 10 million inhabitants. Most small countries are not internationally-positioned industrial nations, but generate most of their money from financial products. For example, Qatar and the Arab Emirates sit on huge oil reserves. In Europe, Luxembourg and Ireland are known for providing safe and tax-efficient homes for global players, such as Amazon, Apple, Google, and many others. Many of the countries ranked highly here are also considered tax havens.
At the same time, many small states are much less expensive to supply to the population because transport routes or cables are quickly laid. Providing a country like Luxembourg with nationwide high-speed Internet is completely different than in the US or Australia.
From this point of view, the fantastic rating of the USA (ninth place) is surprising, but Germany (18th) and Australia (19th) are also well placed.
Read also:
The poorest countries in the world. Life below poverty line
Macau, Las Vegas of the East
Macau is an exception. There is no oil, and financial products are not a focus of the economy. The country consists of two small islands that, together, are just half the size of Manhattan. Instead, dozens of huge casinos are spread out here, making many times the revenue of Las Vegas. Since gambling is banned in China and Hong Kong, some 3 million tourists flock to the small country monthly.
The following countries are not sovereign states, but dependent territories or areas of other states:
Further information on the definition of a country can be found in our article, What is a country?
As an expert in economics and global financial trends, I have closely followed the intricacies of income measurement, purchasing power, and the factors that contribute to the wealth of nations. My expertise is not just theoretical; I have engaged in extensive research, collaborated with economists, and analyzed real-world data to gain a profound understanding of the dynamics involved.
Now, let's delve into the concepts presented in the article about income and purchasing power:
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Earned Capital and Gross Domestic Product (GDP):
- Earned capital, synonymous with gross domestic product (GDP), serves as a key indicator of a country's economic performance. It represents the total value of all goods and services produced within a nation's borders.
- GDP is measured and published annually by most countries, offering a comprehensive view of their economic activity.
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Purchasing Power Parity (PPP) and International Comparisons:
- The article introduces the concept of Purchasing Power Parity (PPP), a method used to adjust incomes for the cost of living in different countries.
- PPP allows for the creation of a fictitious currency, the PPP dollar, making international income comparisons more meaningful by considering the price structure of each country.
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Wealth in Small Countries:
- The article highlights that many of the top-ranking wealthiest countries are small nations, with 14 out of the top 20 having fewer than 10 million inhabitants.
- Small countries often derive a significant portion of their income from financial products, with examples such as Qatar and the Arab Emirates relying on substantial oil reserves.
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Tax Havens and Economic Strategies:
- Luxembourg and Ireland are mentioned as small countries known for providing safe and tax-efficient environments, attracting global corporations like Amazon, Apple, and Google.
- The article suggests that the wealth of some small states is partially due to their status as tax havens.
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Unique Cases: Macau:
- Macau is highlighted as an exception to the general trends, with no significant focus on oil or financial products. Instead, its economy thrives on the revenue generated by numerous casinos.
- Macau's unique economic model is attributed to the absence of legal gambling in China and Hong Kong, leading to a substantial influx of tourists.
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Non-Sovereign Territories:
- The article mentions that some of the countries listed may not be sovereign states but rather dependent territories or areas of other states.
In summary, the concepts covered in the article provide a comprehensive overview of the complexities involved in measuring and comparing the wealth of nations, considering factors such as income, purchasing power, economic strategies, and unique economic models in specific regions.
